European Union reaches settlement with Microsoft

The European Commission has reached a settlement with Microsoft that aims to open the software company up to greater competition from open source developers.

The European Commission has reached a settlement with Microsoft that aims to open the software company up to greater competition from open source developers.

Changes agreed by Microsoft today will give open source suppliers the ability to offer alternatives to Microsoft work group servers, which are compatible with the Windows desktop operating system, the commission said.

Under the settlement, Microsoft has agreed to provide interoperability information, and has significantly reduced the royalty payments for open source developers of Windows-compatible work group servers.

The agreement follows a European Commission decision against Microsoft in 2004 over anti-competitive practices

Microsoft was fined £346m for infringing EC treaty rules for using its near monopoly in the market for PC operating systems to leverage the market for work group operating systems.

"It is regrettable that Microsoft has only complied after a considerable delay, two court decisions, and the imposition of daily penalty payments," said competition commissioner Neelie Kroes.

"However, the measures that the commission has insisted upon will benefit computer users by bringing competition and innovation back to the server market," he said.

According to the European Commission, Microsoft has a 95% share of the desktop operating systems market, and in excess of 70% for work group server operating systems.

"Open source work group server products are virtually the only alternative for users and are thus the main surviving competitive constraint on Microsoft," the commission said in a statement.

Microsoft has been offering two types of licences to companies for interoperability information following the 2004 ruling.

Following today's agreement, it has reduced the royalties required for its "No Patent" agreement to a flat fee of £7,000 and changed the terms of the licence to make it compatible with the open source business model.

The software company has also reduced the revenue charges for its "patent agreement" to 0.4% of product revenues.

In addition, Microsoft has agreed to publish an irrevocable pledge not to assert any patents it may have over the interoperability information against non-commercial open source software development projects.

Initially Microsoft demanded a royalty rate of 5.95% of revenues and had refused to make the licence compatible with the open source business model, the commission said.

The current settlement comes after the commission issued a statement of objections in March, warning Microsoft over unreasonable pricing.

The measures will ensure that Microsoft's competitors in the work group server market, including those following the open source model, will have access to interoperability information on reasonable terms, said the European Commission.

The European Commissions 2004 ruling against Microsoft was recently held up by the European Court of the First Instance.

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